Brent crude oil prices rose to its highest since October 2014 after it hit $88.4 on Tuesday as drone attacks on targets in the United Arab Emirates stoked fears across the region. This development if continue will see Nigeria government earning another oil wind fall that could boost the country’s external reserve position. It could possibly result in build up in the excess crude oil revenue earning and thus reduce the Buhari administration’s penchant for borrowing. At $88 oil prices are firmly back to the pre-Buhari regime when the economy was robust and selling about 1.6 million barrels per day. However, with the refineries in moribund position, Nigeria will continue to import fuel and the landing cost will rise further. This will be passed to consumers. Prices of fuel will rise, transportation will go up, price of food items will rise. This will result in imported inflation that counter balance the dollar earnings from oil.
Data from the central bank reveal Nigeria earned about $11.3 billion from crude oil and gas exports in the third quarter of 2021 when oil prices averaged $75 per barrel. Oil bulls have had a good start to the year as the price of the black liquid has rallied, despite the surging cases of the COVID-19 omicron variant, particularly in China and in the United States. This is also supported by easing fears about the Omicron variant’s impact on demand. A recent Goldman Sachs report projects an oil price of $100 per barrel by the end of this year and $105 per barrel in 2023 when the Buhari administration is expected to hand over to a newly elected leadership. According to the OPEC December 2021 monthly report, Nigeria, alongside Iraq, Saudi Arabia and Venezuela boosted its oil output between October and November. The nation average crude oil production increased by 3.83% from 1.228 million bp/d to 1.275 million bp/d. Although there is an increase, the country still struggles to meet up with its OPEC quota of 1.66 million bp/d. The report also spoke about OECD (Organization for Economic Co-operation and Development) Europe crude imports and how it remained strong during the period. It states that, “in terms of source of imports, Iraq took over the spot of top supplier from outside the region, with a share of 9%. Kazakhstan was in second place with 7%, followed by Nigeria in with 6.6%.”
The report stated that the current double-digit inflation and labour market pressures have put a dark spell on Nigeria’s economic outlook. It reads, “The near-term outlook of Nigeria economy is hindered by the elevated inflationary and labour market pressures.” This is evident as Nigeria’s inflation rate grew to 15.63% in December 2021 from 15.4% in November. This increase put an end to a decline that has been going on for 8 months. An analyst at Quantum Economics, spoke about why Nigeria is not meeting its OPEC quota. He has this to say, “Nigeria and other members of the Organization of Petroleum Exporting Countries (OPEC) have not been able to pump enough crude oil, as a result, the group will not be able to meet its production targets for December 2021. “Despite having a target of 1.67 million barrels per day for December, Africa’s leading oil nation can produce only 1.44 million barrels per day in December and 1.49 million barrels per day in November. The quest for over 2 million barrels per day would remain an illusion unless the Petroleum Industry Law is implemented quickly.